Can cannabis cannibalize booze sales?

As policies change around the legalization of marijuana, alcohol companies have braced for impact. So let’s be blunt: What does legalizing marijuana do to alcohol sales?

That’s a question for Foursquare location intelligence. As a company that understands foot traffic trends (always anonymized and in the aggregate), we can uncover how habits have changed in states that have legalized the sale of weed. We’re also able to give industry experts timely insight as four more influential states — California, Maine, Massachusetts, and Nevada — prepare to legalize recreational marijuana sales.

What we found in our new case study:

Oregon’s weed policies have impacted how people unwind, but nightlife patterns remain the same.

On a national level, despite the rumors that Americans are all about ‘Netflix and chill,’ weed legalization doesn’t seem to have affected actual bar and lounge visits. This remains consistent throughout Oregon and on a national level.

Boozing and bud in Oregon

In Oregon, legal recreational marijuana sales began on October 1, 2015. Unlike Colorado and Washington, it is a more recent state to begin legal recreational sales and yet, enough time has passed for us to conduct a year-over-year analysis, which makes it an ideal case study. Our analysis allows us to clearly shed light on the immediate changes once stores can openly sell marijuana.

Our findings: In a 12-month period during 2015–2016, visits to liquor stores** in Oregon grew by 5–10%. Visits grew 2x faster across the U.S. To put it a different way, as legal weed shopping surged in Oregon, visits to liquor stores sagged versus the national average. Oregon residents and visitors are heading to the liquor store more than before but not as much as those in other states around the country.

Interestingly enough, nightlife spots in Oregon (which includes every type of bar, lounge, club and brewery) were unaffected during this time period: in fact, they experienced a 3% growth in year-over-year foot traffic, right on par with national nightlife industry trends. Consumers might be swapping casual drinks at home with cannabis, but our data implies that a night on the couch cannot be replaced by cocktails with friends, buckets of beer or 10 big-screen TVs for Sunday football. Bars could be insulated from the marijuana industry — and are showing stable visit patterns across the country, as well.***

Who smokes the most? Millennials and tourists lead the way

In light of these findings, we took a step back to analyze the broader picture. Who are the dispensary-goers in the four states that first legalized recreational marijuana: Alaska, Colorado, Oregon and Washington? What can we learn about them?

In 2016, foot traffic to marijuana dispensaries in the four states increased 25% year-over-year. Thirty-one percent of visitors to the dispensaries came from out of state. Forty-six percent of visitors were Millennials ages 21–34; but Baby Boomers are celebrating the legalization as well (23% of visitors were over the age of 55).

From our data, we also note some other affinities for dispensary goers: they are fans of Asian food (dumpling and ramen spots, to name two); big drinkers (beverage affinities include draft beer, pale ales, IPAs, and fancy cocktails); and an active bunch, more likely to visit ski resorts, climbing gyms, stadiums and bike shops than average Foursquare users.

On 4/20…

Marijuana’s unofficial day of celebration is 4/20, this Thursday. Does the alcohol industry need to brace for impact as its major competitor gets celebrated at the highest scale?

Turns out that while concerns around competition from legalized marijuana are valid, 4/20 is a holiday when everyone wins. On 4/20/16, we saw an uptick in visits to expected categories including dispensaries (76%), top fast food chains (20%), and pizza places (11%). But we also observed a significant increase in visits to both nightlife spots (+8%) and liquor stores (+36%). We also see shifts during other holidays; on St. Patrick’s Day we saw a 126% lift in visits to Irish pubs.

How can marketers get ahead of the trends?

As a location intelligence company, we leave it to industry experts to interpret the long-term effects of these major consumption changes and determine whether other shifts, like change in average basket size in liquor stores, are also having an impact. We can, however, help marketers be smarter as they consider advertising spend and promotional strategy nationally and in California, Maine, Massachusetts, and Nevada particularly — the four states set to experience similar shifts in 2017 and beyond. Some marketers might be hesitant to roll out new plans or consumer targeting based on marijuana policy change, but it’s an evolving area primed for innovation.

Our takeaways:

The alcohol industry has always seen dynamic competitors stealing share from one another: just consider the rise of craft beer influencing the whiskey business, or mezcal and its impact on tequila. As consumer habits shift (between drinks or different vices altogether) alcohol brands can work with Foursquare for data and insights into how they are losing or gaining share and from whom, in order to refine their marketing strategy.

Capitalize on nightlife by shifting focus towards on-premise visitors. Identify top trending nightlife locations and target consumers who frequently go out or are near these nightlife spots. Pinpoint by Foursquare can leverage first-party data to identify trending locations and run targeted ad campaigns across 150 million devices in the U.S.

Don’t forget to plan a promotional push around 4/20, when we note a big boost of visits to liquor stores and other categories alongside dispensaries.

Quick service restaurants (QSR) can also plan on flighting additional advertising pegged to recreational marijuana legalization. In addition to running targeted ads, Foursquare can help the QSR category measure foot traffic results of any digital campaign with Attribution by Foursquare, so these marketers can understand which ads actually drive consumers into their shops.

Foursquare analyzes foot traffic trails from more than 50 million monthly global users of the Foursquare City Guide and Foursquare Swarm apps and websites, which people use to explore the world and check in. These location-based apps help us understand trends and notable shifts in foot traffic patterns.

In this analysis, Foursquare’s data scientists looked at visits — including both explicit check-ins (from Foursquare Swarm) and passive visits (from both apps). For visits to marijuana dispensaries, we only looked at data for people over 21 within the four states that have legalized recreational marijuana sales (Alaska, Colorado, Oregon and Washington). While trends vary by state, Oregon proves an appropriate case study because of its recent policy changes; mix and volume of categories and venues; and an active population that’s similar in many ways to California, Maine, Massachusetts and Nevada, where new marijuana policy will be implemented. Foot traffic data may not directly correlate to sales metrics, though it is a true indicator of changing patterns of in-store visits.

Foursquare data is always anonymized, aggregated and normalized against U.S. Census data.

**A note: in Oregon and Colorado (and in several other states) some beer and wine can also be purchased at the grocery store. For the sake of this study, we’ve removed grocery store visits from all analyses, as it’s not possible to know which grocery store visits lead to alcohol purchases specifically. In various states, that means more booze may be purchased than we’ve reported here.

***One point to remember: We’re looking at visits, not sales. There have been reports that people’s drinking habits have changed, moving from beer to spirits, for example. And yet our data proves that their daily actions — meaning how often they visit a bar, lounge or nightclub — has remained stable between 2014 and today.